Wells Fargo: Small business owner optimism holds steady

Improvements in current financial situation offset by decreased expectations for future revenues and capital spending allocation

SAN FRANCISCO - July 28, 2011

Wells Fargo & Co. (NYSE: WFC) today announced third quarter results for its Wells Fargo/Gallup Small Business Index that showed small business owners’ optimism holding steady at zero - neither optimistic nor pessimistic – as confidence expressed about present financial situation wasn’t enough to offset lower expectations for future revenues and capital spending allocation.

Earlier this month, Wells Fargo, together with Gallup, surveyed small business owners across the nation to gauge their perceptions of their present situation (past 12 months) and future expectations (next 12 months) in six key areas: financial situation, cash flow, revenues, capital spending allocation, hiring and credit availability.

“Business owners are demonstrating a reluctance to invest in their businesses and are holding onto cash,” said Doug Case, Wells Fargo small business segment manager. “In recent months, we’ve seen strong growth in deposit balances as business owners prepare for potential business challenges and save for future opportunities.”

The third quarter Index score included improvements in sentiment regarding small business owners’ financial situation, cash flows, hiring and credit availability over the past 12 months, leading to a four-point improvement in the survey’s “present situation” from negative 14 (-14) to negative 10 (-10)—a survey metric that has been in negative territory since the first quarter of 2009. Offsetting the quarter’s improvement were significant declines in expectations for revenues and capital spending over the next 12 months. All six measures of the Index showed declines in the future expectations component of the Index, which fell four points to 10 this quarter.

“Sales and demand clearly remain challenged,” said Dr. Scott Anderson, Wells Fargo senior economist. “Rising inflation and gasoline prices combined with renewed weakness in U.S. job creation has undermined consumer confidence and their ability to spend.”

Index Scores: Q3 2010 – Q3 2011

Overall Index Score Present Situation Future Expectations
Q3 2011 (surveyed July 2011) 0 -10 10
Q2 2011 (surveyed April 2011) 0 -14 14
Q1 2011 (surveyed January 2011) 12 -10 22
Q4 2010 (surveyed November 2010) -4 -19 15
Q3 2010 (surveyed July 2010) -28 -26 -2

The following key measures served as main drivers of the Index score during this survey period:

Present Situation (past 12 months)
Financial Situation – 53 percent rated their present financial situation as somewhat or very good, up from 47 percent in Q2 2011. 28 percent rated their present financial situation as somewhat or very poor, down from 33 percent in Q2 2011
Cash Flow – 42 percent rated their present cash flows as somewhat or very good, up from 38 percent. 34 percent rated their present cash flows as very or somewhat poor, down from 38 percent
Hiring – 14 percent rated that the number of jobs or positions at their company increased a lot or a little, up from 10 percent in Q2 2011.
Credit Availability – 34 percent rated that it was somewhat or very difficult to obtain credit, up from 30 percent in Q2 2011.

Future Expectations (next 12 months)
Revenues – 42 percent expect their company’s revenues to increase a little or a lot, down from 49 percent in Q2 2011
Capital Spending – 21 percent expect the amount of money they allocate towards capital spending to increase a little or a lot, down from 26 percent in Q2 2011

For more Index results and to hear a podcast by Wells Fargo economist, Ed Kashmarek on August 2, visit the Small Business Index section of Wells Fargo’s Business Insight Resource Center at www.wellsfargobusinessinsights.com/small-business-index

About the Small Business Index
Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed small business owners on current and future perceptions of their business financial situation. The Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. Results are based on telephone interviews with 605 small business owners in all 50 United States conducted July 6-12. The overall Small Business Index is computed using a formula that scores and sums the answers to 12 questions — six about the present situation and six about the future. An Index score of zero indicates that small business owners, as a group, are neutral -- neither optimistic nor pessimistic -- about their companies’ situations. The overall Index can range from -400 (the most negative score possible) to +400 (the most positive score possible), but in practice spans a much more limited range. The margin of sampling error is +/- four percentage points.

About Gallup
For more than 70 years, Gallup has been a recognized leader in the measurement and analysis of people’s attitudes, opinions and behavior. While best known for the Gallup Poll, founded in 1935, Gallup’s current activities consist largely of providing marketing and management research, advisory services and education to the world’s largest corporations and institutions.

About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.3 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com and wachovia.com), and other distribution channels across North America and internationally. With approximately 275,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

Wells Fargo is America’s #1 small business lender (2009 Community Reinvestment Act government data) and a leading lender to women- and diverse-owned businesses. With the nation’s largest network of retail banking stores, and an award-winning online Business Insight Series (www.wellsfargobusinessinsights.com) including videos, webcasts and articles, Wells Fargo provides business owners with timely advice and information to educate and help them succeed financially. For more information, or to speak with a Wells Fargo banker, visit wellsfargo.com/biz or call the National Business Banking Center at 1-800-CALL-WELLS.

Note: Complete survey results available upon request or at www.wellsfargobusinessinsights.com/small-business-index on August 2nd.